Interest Rate Update

Forecasting interest rate movements in Australia has probably left many economists looking for another hobby. Considering that the last change in Official Interest rates was August 2016 its a bit like picking “heads” at a two-up game. Rates will change at some point but although I hate myself for saying it, “this time its different”. The biggest concern for the Central Bank remains the housing sector and unlike virtually every other typical cycle, house prices have declined across Australia without interest rates or unemployment rising. 

This particular and unusual development sits squarely at the feet of the Central Bank and its tightening of Bank lending practices. This basically becalmed the property market and then turned into a full blown credit crunch causing 7 – 10% property price declines across capital cities. Against a backdrop of the Banking Royal Commission and growing certainty of global trade wars, the Reserve Bank will find that only very small upward movements in the Official Cash Rate will have dramatic effects in property price deflation and contractions in the economy. 

The opportunity ahead, look for investment properties in areas where massive NSW Government Public sector spending has taken place. Locations like the Westmead and Frenchs Forrest Hospital precincts are two areas worth targeting for investment properties.

Simone Giorgi